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BP Business Economic Loss Claim Appeal 2017-552: Construction Methodology Appropriate For Matching Profit and Loss Statements of Installer and Seller of Sound Equipment

The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms

Claimant, a Tampa, Fl (Zone C) seller and installer of sound equipment, was granted a BEL award of $240,075.02, pre-RTP. BP appeals the award, alleging that the Program erred in its use of the Construction Methodology in Policy 495. Specifically, BP argues that the AVM methodology was more appropriate for analysis and smoothing of this Claimant’s financials, since it assumes that monthly revenues adequately reflect a Claimant’s business and allocates expenses according to those revenues. In contrast, the Construction methodology used by the Program assumes that monthly expenses are more accurately recorded than revenues. In this instance, argues BP, Claimant is a franchisee of XXXX  and installs and plays background music at commercial establishments, and according to BP it acknowledged that its monthly revenue was generally recorded in the same month as when its work was performed. Accordingly, BP argues for the use of AVM. It makes a final proposal of $0 or alternatively seeks a remand for recalculation of the award using AVM.
Claimant responds generally that much like a construction company, it collects very little inventory and has little lag time between the purchase and use of the materials on its projects. It proposes the affirmation of the Program’s award by use of its chosen Construction methodology.
This panelist asked for the Program’s input as to its decision to use the Construction methodology, and in due course a response was received. Therein, the Program noted, in pertinent part, that Claimant’s NAICS code was assigned as 238210, Specialty Trade Contractors, and would be considered under the Construction Methodology of Policy 495. It further pointed out that Claimant’s COGS were recorded as equipment is purchased for the job and that there was no lag time between purchase and use, with minimal inventory being held. It further confirmed that materials are purchased for specific jobs. Based upon the above, the Program accountant determined that Claimant’s variable expenses were more accurately recorded on monthly P&Ls than were revenues, such that the Construction Methodology would be more appropriate in sufficiently matching Profit and Loss statements.
BP’s decision to propose $0 rather than to attempt a recalculation of the award using its prescribed AVM methodology was an important factor in this panelist’s decision on this appeal. The Program’s response, which confirmed its due diligence in this case, more than justified its decision to use the Construction methodology for
this Claimant, especially in light of the broad discretion granted the Program’s accountants by Policy 495 in the selection of a methodology that most sufficiently matches Claimant’s financials. No alternative remand basis exists.

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